Insurance premiums on personal lines products have increased despite more market competition from new players, KPMG says in its latest report on the general insurance industry.

Gross written premium has increased by 6.3% to $37.6 billion, compared to $35.4 billion in the 2009 financial year.

KPMG says in its annual General Insurance Survey this is due to the net effect of premium increases and overall policy growth, as well as acquisition activity.

“The premium increases in personal lines have been achieved in an environment of greater competition with the emergence of a number of new players,” it says.

“These have been partly through white-label products distributed through outlets such as Virgin Money, Australia Post, Coles and more recently Myer.”

KPMG says the impact of these newer players on the overall insurance market has been limited at this stage, and the major players – Suncorp, IAG, QBE and Allianz – continue to dominate.

But the top-tier companies are turning insurance into a commodity through their media campaigns, KPMG warns.

“Consequently, insurers may not expect to continue to realise the same level of price increases that were achieved in personal lines during the past two years.”

But KPMG Insurance Partner Ian Moyser says this doesn’t mean there won’t be any increases in premiums during the next 12 months.

“Premiums will continue to rise to the extent that insurers need to cover the cost of claims and charge an appropriate price for the risks being covered,” he told insuranceNEWS.com.au.

While personal lines premiums are expected to continue to grow, the commercial market is a lot tougher, KPMG says.

“The commercial lines market continues to remain very competitive, with the rating environment remaining patchy across different classes.

“A study by Aon of the corporates revealed that 2010/11 premium renewal rates are expected to be flat.”

KPMG says this will be due to the number of insurers in this segment and competition to increase market share.

“Moderate rate increases in 2010/11 have been flagged for certain parts of the market,” the report says.

[Also see ANALYSIS]